China's outstanding growth rate leads recovery in world economy

Hong Kong: China dominated proceedings at the Asian Financial Forum in Hong Kong yesterday, in the same way that its outstanding growth rate seems to be leading the world economy on its uncertain path to recovery.

Speaker upon speaker at the two-day event noted the emergent supergiant's pivotal role in the post-crisis landscape, but stressed the need to promote domestic demand for the country's future development, lessening the dependence on debt-burdened Western consumers in a deleveraging world.

Billing 2010 as a year of transformation for the world and for Asia, IMF managing director Dominique Strauss-Kahn told a keen audience "good news and bad news": that global recovery is a reality, but fragile. A revised 2011 GDP figure of probably over 7 per cent for the Asian economies ex-Japan is due to be announced by the Fund in the coming days.

With that outperformance comes responsibility, he said, and the region's leaders know they have to "rely less on the export-led model". Commenting on fears that overheating might in fact be the concern now in emerging Asia, Strauss-Kahn said he didn't anticipate asset bubble risk. Equally, nor did he fear ‘double-dip' recession at global level.

Others concurred with this bifurcated ‘not too hot, not too cold' Goldilocks-type scenario, focusing on the opportunities and challenges coming China's way in its newfound leadership capacity.

Seizing the chance to set the tone for the day, Hong Kong chief executive Donald Tsang noted that pending internationalization of the yuan highlighted the city as "China's international financial centre". The Chin-ese unit's potential reserve currency status was another of the day's key themes, though that was not thought an imminent prospect, with full convertibility some distance away as the country tries to strike a balance between growth and stability.

Economist Stephen Roach, chairman of Morgan Stanley Asia, warned, however, against a "worrisome sense of complacency" among participants, about this new economic order.

Observing that 95 per cent of recorded Chinese growth in 2009 was accounted for by special stimulus measures, he looked forward to the next five-year plan to turn resilience into rebound, hoping it wouldn't be confronted by US protectionism in particular.

Likewise, responding to this correspondent's suggestion on the conference sidelines that the West is hooked on dangerously low interest rates, Roach claimed that central banks are making a risky and destabilizing mistake in keeping policy biased to emergency settings.

Bullish on Dubai

In a session discussing global investment opportunities, panellist Stuart Pearce, special adviser to the chairman of the Qatar Financial Centre Authority, expressed the view that both Qatar and Dubai had built financial centres which are an encouragement to international investors in the Gulf region. As to Dubai's recent financial disturbance, he said: "[it] has been in the papers a lot, but it's easy to forget how important Dubai has been in raising the Middle East's profile". It will "probably emerge a lot stronger" for its experience, he suggested.